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. Last Updated: 07/27/2016

Rich Nations Divided on Economy

PARIS -- Any idea the G-7 had some master plan to save the world economy from imploding was given a short shrift on Saturday and rarely has the rich-nation club been further from a common economic policy prescription.

Something clearly must be done to stop the relentless rot across the developed world's major economies and finance leaders from the Group of Seven most powerful industrialized countries were quick to agree on at least that at their Paris talks.

But all they offered in the end was a series of national actions and outlooks that were either already in place or appropriate to domestic political and economic imperatives.

Some ministers spoke openly that the common approach was not even desirable -- essentially that each country should continue to plow its own furrow regardless of the lip-service paid to sharing plans with the G-7 colleagues.

Newly appointed U.S. Treasury Secretary John Snow, at his G-7 debut, put it in a nutshell when he said Saturday: "Each G-7 nation must take its own steps -- appropriate to its own respective set of conditions -- to spur growth."

Assuming most governments are keen to spur sagging economies anyway, what was the point of the G-7?

"There is nothing new here -- long on sentiment, short on detail," said Julian Callow, economist at CSFB London.

Expressions of solidarity and warm words of confidence building are important in the current environment, G-7 advocates will argue.

Economic confidence, both that of individuals and corporations, is at an extremely low ebb -- battered by one of the biggest collapses of world stock markets in decades, fears for banking stability and the looming specter of war in Iraq.

But there are deep fissures within this club which seemed omnipotent for much of its three decades in existence. Differences are now so defined that some analysts say they are akin to the worst of G-7 breakdowns during those 30 years.

"This just reminds me that we are really back to the Reagan period and back to the rhetoric of confrontation between the U.S. and Germany -- except now it's the euro zone," Eric Chaney, economist at Morgan Stanley in Paris.

Chaney was referring to the 1987 spat between the administration of then U.S. President Ronald Reagan and the German government over economic policy -- one that is widely cited as precipitating the 1987 stock market crash.

This time around, a bitter dispute between U.S. and French and Germans leaders over the possibility of war to disarm Iraq was the most obvious cloud hanging over this meeting.

But there were many others.

There are deep transatlantic splits over the appropriateness of U.S. President George W. Bush's $695 billion tax cut plan as a growth-boosting measure.

Snow, predictably, lauded the measure as the real key to lifting the world economy out of the mire.

The European Central Bank and the Eurogroup chairman publicly balked at the risk to the world economy of ballooning U.S. budget and trade gaps.

The European delegations themselves have been squabbling for months about whether they can loosen their own self-imposed budget deficit limits and have been toying with using war in Iraq as an excuse to give them some additional spending leeway.